Amazon sees 50% boost to capital spending this year, shares tumble

Amazon CEO Andy Jassy announced a massive 50% increase in capital expenditures for 2026 during an earnings call in Seattle on February 5, 2025, as the company scales up its artificial intelligence infrastructure to compete with Microsoft and Google. The projection, which includes a staggering $200 billion investment plan, triggered an immediate 11.5% drop in the company's shares during after-hours trading. Investors reacted sharply to the news, signaling growing skepticism over whether the enormous costs of the AI boom will yield immediate financial returns. This capital pivot aligns Amazon with other tech 'hyperscalers' who are collectively expected to spend over $630 billion this year on data centers and advanced computing. During the investor call, Jassy defended the strategy by highlighting the robust performance of Amazon Web Services (AWS), which saw revenue grow to $35.6 billion in the December quarter. While this 24% year-over-year growth mark was the highest in 13 quarters, it was still outpaced in percentage terms by competitors like Google Cloud and Microsoft Azure. Jassy argued that Amazon's growth is occurring on a much larger annualized base, making direct comparisons difficult. However, the market appeared more focused on the fact that the projected 2026 spending could potentially exceed the company's operating cash flow. Beyond technical infrastructure, Amazon is also navigating significant shifts in its retail and satellite businesses. The company forecast a first-quarter operating income that fell short of analyst estimates, largely due to $1 billion in costs tied to its Leo high-speed satellite internet project. Additionally, the firm is retreating from its physical grocery experiment, taking $610 million in asset impairments as it closes Amazon Go and Amazon Fresh locations to refocus on Whole Foods. Despite laying off 30,000 employees over the recent period to streamline operations, the sheer scale of the AI investment remains the primary driver of current market volatility for the e-commerce giant.